Options at 55

davidscot

Just looking for a wee bit guidance/advice/tips here to begin with.
I will reach the double 5 birthday in a couple of months and seem to have started getting mailshots and telephone calls regards getting access to my pension. Now I am not as daft as to go with some random company who calls me out of the blue, I would do my homework first but was wondering if the kind people on MSE could give some help here.
Currently still in employment and pay into the company pension scheme and also have a pension pot elsewhere of roughly £150k.
Owe around £50k of our mortgage which we overpay each month. Anyway one option I was thinking of was to get my 25% lump sum and between that and our savings we would pay the mortgage off then the money we would have used for that we could start an ISA or some other way of saving. The remaining pot would still be working away for us in the background along with the company scheme so when I do come to retire I would have that to fall back on. Anyone any thoughts on this or if I am missing something else could you point this out to me. Cheers in advance for any help here

ThinkingOutLoud_2

Hi davidscot,

You are right about being very wary of such cold calls - you have noticed there is a lot of news and government attention on those tempting you to trade your pension. They can afford to blindly call thousands because those who give in are funding that and their profits. BEWARE!!

You don't mention the value of your other pension or your income needs or if your partner (you said "we") has anything similar. So let's ignore that and the many issues / questions / restrictions once you have started to take your pension (lots to consider).

Focussing on your question of paying off the mortgage - consider simply what % growth your pension is seeing vs what interest you are paying on the mortgage. I suspect you pension is doing the same or better at the moment. Even if they are the same, as you say 25% of your pension is tax free.

If you haven't got it - get the current value of all your pensions and use any of the online tools to see what kind of income that would give you if you retired at various ages. Is that enough yet?

HappyHarry

davidscot wrote: »

Just looking for a wee bit guidance/advice/tips here to begin with.
I will reach the double 5 birthday in a couple of months and seem to have started getting mailshots and telephone calls regards getting access to my pension. Now I am not as daft as to go with some random company who calls me out of the blue, I would do my homework first but was wondering if the kind people on MSE could give some help here.
Currently still in employment and pay into the company pension scheme and also have a pension pot elsewhere of roughly £150k.
Owe around £50k of our mortgage which we overpay each month. Anyway one option I was thinking of was to get my 25% lump sum and between that and our savings we would pay the mortgage off then the money we would have used for that we could start an ISA or some other way of saving. The remaining pot would still be working away for us in the background along with the company scheme so when I do come to retire I would have that to fall back on. Anyone any thoughts on this or if I am missing something else could you point this out to me. Cheers in advance for any help here

Just because it is possible to access your pension at 55, it is often not best to do so.

Another option you have is to continue overpaying your mortgage, continue contributing to your pension and getting tax relief on it, and retire with a larger pension at your intended retirement age.

PeacefulWaters

Doing nothing might be the best course of action.

davidscot

Thanks for the replies so far. Agree with the point regards overpaying and keeping contributions going then retiring with a larger pension but as original post says I am just considering all options here. The other pension at the moment only has around £15k-ish in it as we have just moved across to it. Wife has a very small pension provision but she cannot get to it yet. Had a quick look and yes I think the pension and the mortgage are both around the same mark. Still lots to consider I guess

ThinkingOutLoud_2

Ok so there is a lot of complexity to everything, but in the end it boils down to more of a simple outcome, I think. You are doing fine as you are.

Once you touch your pension, your ongoing ability to pay more in to a pension is becoming more limited.

If the growth on your pension is similar to your pension - there is still the tax fee 25% advantage to your pension when taken.

On balance as per the others, stay as you gives you flexibility later.

Paying off the mortgage might have a "feel good appeal•, but there is perhaps no overriding logic to doing it with your pension lump sum until you are actually ready and able to retire with the income you need.

dunstonh

Owe around £50k of our mortgage which we overpay each month. Anyway one option I was thinking of was to get my 25% lump sum and between that and our savings we would pay the mortgage off then the money we would have used for that we could start an ISA or some other way of saving.

Why on earth would you want to do that? That seems a really poor idea unless your mortgage interest rate is, for some reason, much higher than the typical ones available.

Something has clearly given you that idea. So what is it that you think makes it a good idea?

davidscot

dunstonh wrote: »

Why on earth would you want to do that? That seems a really poor idea unless your mortgage interest rate is, for some reason, much higher than the typical ones available.

Something has clearly given you that idea. So what is it that you think makes it a good idea?

Guess I was just thinking aloud and going through different options in my head. Why do you think it is such a bad idea

dunstonh

davidscot wrote: »

Guess I was just thinking aloud and going through different options in my head. Why do you think it is such a bad idea

1 - Your retirement planning is for retirement. By spending some fo the money you have allocated to retirement now, your older self will be worse off
2 - Mortgage interest rates are at all time lows and investment returns are higher than the mortgage interest. You would be taking money out of the thing that is making you more to pay off something that is costing you less. (i.e. big standard default funds have been returning 5.5% a year. Your mortgage is probably around 1-2%. Why take money out of something earning 5.5% to clear something costing 1-2%)
3 - Taking the cost saving on the mortgage to feed into cash savings is inefficient and will almost certainly leave you worse off (ISA is not as efficient as pension)
4 - your pension fund will likely double or more between now and retirement. So, taking that 25% now means you miss out on a much larger amount later.

Can you afford to do this? You mention one pension fund is £150k. Nice but nothing spectacular. You don't mention the other pension in detail. Put the two together and is it enough for you to live on in retirement. Not just for income but also all that capital expenditure you will have as well. i.e. can you afford to take 25% of the capital that you would likely need then and spend it now?

davidscot

dunstonh wrote: »

1 - Your retirement planning is for retirement. By spending some fo the money you have allocated to retirement now, your older self will be worse off
2 - Mortgage interest rates are at all time lows and investment returns are higher than the mortgage interest. You would be taking money out of the thing that is making you more to pay off something that is costing you less. (i.e. big standard default funds have been returning 5.5% a year. Your mortgage is probably around 1-2%. Why take money out of something earning 5.5% to clear something costing 1-2%)
3 - Taking the cost saving on the mortgage to feed into cash savings is inefficient and will almost certainly leave you worse off (ISA is not as efficient as pension)
4 - your pension fund will likely double or more between now and retirement. So, taking that 25% now means you miss out on a much larger amount later.

Can you afford to do this? You mention one pension fund is £150k. Nice but nothing spectacular. You don't mention the other pension in detail. Put the two together and is it enough for you to live on in retirement. Not just for income but also all that capital expenditure you will have as well. i.e. can you afford to take 25% of the capital that you would likely need then and spend it now?

Certainly food for thought and I see where you are coming from (now) The other pension fund is my current workplace pension where company puts in 4% to match my contributions. The larger one is one that we had before we changed providers and I just left it with the old provider and didn't transfer it across. So in your considered opinion which I take on board we just keep everything as is for the present and see what the future brings